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Beyond the Numbers

Worries About New Restrictions May Continue To Weigh On Wall Street
11/19/2020 8:58 AM

The major U.S. index futures are pointing to a lower open on Thursday, with stocks likely to extend the sell-off seen late in the previous session.

Lingering concerns about new restrictions and lockdowns as a result of the ongoing coronavirus pandemic may continue to weigh on Wall Street.

Positive news about a potential coronavirus vaccine helped to drive the Dow and the S&P 500 to record highs earlier this week, but the recent surge in new cases has led to a pullback since then.

A number of states have announced stricter restrictions, including closing schools and some businesses, leading to worries about an economic downturn in the months leading up to the widespread distribution of a vaccine.

Adding to the negative sentiment, the Labor Department recently released a report showing an unexpected rebound in first-time claims for U.S. unemployment benefits in the week ended November 14th.

After turning in a lackluster performance for much of the session, stocks came under pressure in the latter part of the trading day on Wednesday. The major averages slid firmly into negative territory after lingering near the unchanged line earlier in the day.

The major averages saw further downside going into the close, ending the day near their lows of the session. The Dow tumbled 344.93 points or 1.2 percent to 29,438.42, the Nasdaq slid 97.74 points or 0.8 percent to 11,801.60 and the S&P 500 slumped 41.74 points or 1.2 percent to 3,567.79.

The late-day sell-off on Wall Street came amid renewed concerns about new restrictions and lockdowns as a result of the recent surge in coronavirus cases.

A number of states are imposing new restrictions due to the spike in cases, with New York City Mayor Bill de Blasio announcing that public schools in the city will be closed as of tomorrow.

The tighter restrictions come as data from John Hopkins University showed there were nearly 162,000 new coronavirus cases and 1,707 deaths on Tuesday. The daily death toll represents a six-month high.

Concerns about the economic impact of the lockdowns overshadowed more upbeat news regarding the coronavirus vaccine candidate being developed by Pfizer (PFE) and BioNTech (BNTX).

Pfizer and BioNTech said the final efficacy analysis of an ongoing Phase 3 study of their coronavirus vaccine candidate indicated a vaccine efficacy rate of 95 percent.

The companies said that efficacy was consistent across age, gender, race and ethnicity demographics and suggested the vaccine candidate also helped to fend off severe disease.

Pfizer and BioNTech said they plan to submit a request to the FDA for an Emergency Use Authorization for the vaccine "within days."

Traders also shrugged off a report from the Commerce Department showing new residential construction spiked by more than expected in the month of October.

The report said housing starts surged up by 4.9 percent to an annual rate of 1.530 million in October after soaring by 6.3 percent to an upwardly revised rate of 1.459 million in September.

Economists had expected housing starts to jump by 3.2 percent to a rate of 1.460 million from the 1.415 million originally reported for the previous month.

With the bigger than expected increase, housing starts reached their highest annual rate since coming in at 1.567 million in February.

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 3.7 percent to its lowest closing level in well over four months. The sell-off by gold stocks came amid a decrease by the price of the precious metal.

Considerable weakness also emerged among oil stocks, as reflected by the 2.4 percent drop by the NYSE Arca Oil Index. The weakness in the sector came despite an increase by the price of crude oil.

Tobacco stocks also came under pressure over the course of the session, resulting in a 2.5 percent plunge by the NYSE Arca Tobacco Index. The index reached a nearly ten-month intraday high before turning lower.

Biotechnology, natural gas and utilities stocks also moved sharply lower as the day progressed, reflecting the broad based weakness that emerged on Wall Street.

Commodity, Currency Markets

Crude oil futures are slipping $0.24 to $41.58 a barrel after rising $0.39 to $41.82 a barrel on Wednesday. Meanwhile, after falling $11.20 to $1,873.90 an ounce in the previous session, gold futures are plunging $22.10 to $1,851.80 an ounce.

On the currency front, the U.S. dollar is trading at 104.03 yen versus the 103.82 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1834 compared to yesterday’s $1.1853.

Asia

Asian stocks ended mixed on Thursday as a surge in coronavirus infections coupled with concerns about new lockdowns and restrictions in the U.S. and Europe offset additional positive developments on the vaccine front.

Daily coronavirus cases hit fresh highs in Japan and South Korea on Wednesday, while South Australia has commenced six days of stay-at-home restrictions.

Chinese shares rose as President Xi Jinping pledged to cut tariffs and sign more free trade agreements to salvage a pandemic-ravaged economy.

The benchmark Shanghai Composite Index rose 15.78 points, or 0.5 percent to 3,363.09, while Hong Kong's Hang Seng Index slid 187.32 points, or 0.7 percent, to 26,356.97.

Japanese stocks extended losses from the previous session after daily coronavirus cases in Japan exceeded 2,000 on Wednesday to hit a new high, pushing up hospitalizations. The Nikkei 225 Index fell 93.80 points, or 0.4 percent, to 25,634.34, while the broader Topix ended 0.3 percent higher at 1,726.41.

Market heavyweight SoftBank Group shed 0.9 percent and Fast Retailing lost 2.3 percent. Tech stocks such as Tokyo Electron and Advantest dropped 1.8 percent and 2.8 percent, respectively.

Australian markets recouped early losses to close modestly higher, with financials leading the advance as South Australia began one of the world's toughest lockdowns to stifle the latest cluster of 23 novel coronavirus infections.

The benchmark S&P/ASX 200 ended up 16.10 points, or 0.3 percent, at 6,547.20 after a late-session surge as October employment figures suggested a jobs recovery was gathering pace. The broader All Ordinaries Index rose 16.20 points, or 0.2 percent, to 6,742.70.

The Australian economy added 178,800 jobs last month for a total of 12,773,900, far surpassing expectations for the loss of 30,000 jobs after shedding 29,500 jobs in the previous month, a government report showed.

The jobless rate ticked up to 7 percent from 6.9 percent in September as more people looked for work.

Financials extended gains to a fourth day, with the big four banks rising between 1.7 percent and 2.3 percent. Bluescope Steel jumped 5.3 percent to hit a two-year high after a profit upgrade.

QBE Insurance Group tumbled 3.9 percent and Suncorp lost 3 percent after a court decision exposed insurers to millions of dollars in potential claims for Covid-related losses.

Gambling company Crown Resorts declined 1.9 percent after it was asked by the NSW regulator to delay its planned December 14 opening of its Barangaroo casino complex in Sydney.

Seoul stocks erased early losses to end on a flat note. The benchmark Kospi finished marginally higher at 2,547.42, the highest level since February 1, 2018.

Battery makers rose as the number of daily new coronavirus cases in South Korea exceeded 300 for the second consecutive day, with authorities warning of another potential wave of the pandemic. Rechargeable battery maker Samsung SDI advanced 3.4 percent.

Europe

European stocks have fallen on Thursday, with concerns over surging Covid-19 cases and a stalemate over a post-Brexit trade deal weighing on sentiment.

The World Health Organization said that Europe made up almost half of the world's four million new coronavirus cases last week, with Austria seeing a 30 percent increase in new cases compared to last week.

Media reports suggested that European leaders are considering no-deal Brexit plans due to the lack of progress on key sticking points.

The Times reported that EU leaders are concerned that businesses and fishing communities will be hit by economic disruption without EU contingency measures to cushion the blow of no-deal.

The U.K.’s FTSE 100 Index, the German DAX Index and the French CAC 40 Index have all slid by 0.7 percent.

Low-cost airline Norwegian Air has moved sharply lower after it filed for bankruptcy protection in Ireland.

ABB has also moved to the downside. The Swiss engineering company said it is exploring all options to offload three business units that generate $1.75 billion in sales.

Commercial real estate company Unibail-Rodamco-Westfield SE has also declined after appointing a new CEO.

Ailing conglomerate ThyssenKrupp has plummeted as it posted a wider net operating loss in fiscal 2020 and unveiled plans to cut 7,400 jobs over the next three years.

Kion Group, a leading provider of industrial trucks and supply chain solutions, has also plunged after announcing a capital increase.

Chemicals maker Johnson Matthey has also come under pressure after posting a significantly lower profit for the first half of the fiscal year.

Meanwhile, Euromoney Institutional Investor has moved higher in London. After posting disappointing full-year results, the business and finance information firm said demand for its price reporting and essential market intelligence "remains strong".

Postal service and courier company Royal Mail has shown a significant move to the upside after raising its annual revenue estimate.

U.S. Economic Reports

After reporting initial jobless claims at their lowest level since before the coronavirus-induced lockdowns in the previous week, the Labor Department released a report on Thursday showing an unexpected rebound in jobless claims in the week ended November 14th.

The Labor Department said jobless claims climbed to 742,000, an increase of 31,000 from the previous week’s revised level of 711,000.

The rebound came as a surprise to economists, who had expected jobless claims to edge down to 707,000 from the 709,000 originally reported for the previous week.

Meanwhile, the report said the less volatile four-week moving average fell to 742,000, a decrease of 13,750 from the previous week’s revised average of 755,750.

Philadelphia-area manufacturing activity has seen continued growth in the month of November, the Federal Reserve Bank of Philadelphia revealed in a separate report, although the pace of growth slowed compared to the previous month.

The report said the Philly Fed Index pulled back to 26.3 in November after spiking to 32.3 in October, but a positive reading still indicates growth in regional manufacturing activity. Economists had expected the index to drop to 22.0.

Looking ahead, the Philly Fed said most future indexes also moderated this month but continue to indicate that firms expect growth over the next six months.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of October. Existing home sales are expected to slump by 1.2 percent in October after spiking by 9.4 percent in September.

The Conference Board is also due to release its report on leading economic indicators in the month of October at 10 am ET. The leading economic index is expected to climb by 0.7 percent.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year noes.

Federal Reserve Governor Michelle Bowman is due to deliver the keynote address at the 2020 Financial Stability Conference: "Stress, Contagion, and Transmission" virtual event at 12:35 pm ET.

Stocks In Focus

Shares of Sonos (SONO) are moving sharply higher in pre-market trading after the audio equipment maker reported better than expected fiscal fourth quarter results and announced a new $50 million stock repurchase program.

Victoria's Secret and Bath & Body Works parent L Brands (LB) is also seeing significant pre-market strength after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Macy’s (M) may come under pressure after the department store chain reported a narrower than expected third quarter loss but a steep drop in same-store sales.

Stock exchange operator Nasdaq (NDAQ) is also likely to see initial weakness after announcing an agreement to acquire anti-financial crime company Verafin for $2.75 billion in cash.
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